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Two-for-one tactics threaten European car rebound

PARIS/FRANKFURT, July 14 (Reuters) - Elie Chauvin did not plan to buy a new car when he stopped by his local Hyundai showroom, but the retired builder came away with two for the price of one.

The bargain-basement offer in Nimes, France - buy an ix35 crossover utility vehicle, get an i10 mini thrown in for one euro ($1.31) - is further evidence that Europe is a car buyer's paradise and a manufacturer's nightmare.

"It was the offer that I noticed," said Chauvin, 63. "I wouldn't have changed my car otherwise. Not yet."

His message echoes confidential market research seen by Reuters; discounts by mass-market car brands jumped 17 percent from a year earlier to an average 2,518 euros per vehicle in May across Europe's five biggest markets.

Europe's decline in car sales is showing signs of bottoming out, even as the market shrinks for a sixth straight year to a two-decade low. But cut-throat price competition among brands and dealers threatens to kill any sense of relief for automakers struggling with excess plant capacity.

Almost all are bleeding cash in Europe, with the exception of Volkswagen (Other OTC: VLKAF - news) and its German luxury peers.

Regional losses last year came to 704 million euros for Fiat and $1.8 billion each for Ford (NYSE: F - news) and General Motors (NYSE: GM - news) , while euro-centric PSA Peugeot Citroen posted a thumping 5 billion euro net loss.

Out of concern for brand image, many carmakers mask their price-slashing by registering some of their own vehicles to sell as used, or by offloading them to rental firms at the end of the month with a hefty mark-down.

Others, like South Korea's Hyundai (KSE: 011760.KS - news) , are coming up with ever more imaginative discounts they can brazenly advertise to grab a bigger share of Europe's shrinking market from weaker rivals.

Many of Hyundai's recent Spanish customers will be getting 2,250 euros back, after it pledged last month to refund one car loan instalment of up to 150 euros for each of the first 15 goals scored by the national soccer side in the Confederation Cup.


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